US President Joe Biden opened the Leaders Climate Summit calling on countries to be more ambitious in fighting “the existential crisis of our time.” The summit galvanized new commitments from governments around the world and provided much-needed momentum heading into the 2021 United Nations Climate Change Conference (COP26) in November. But governments alone cannot solve the climate crisis.
The role of business will be critical, and public-private partnerships will be essential. Business can take three key actions to help the world meet its climate change goals.
1. Mobilize capital to finance the green transition
The green transition requires significant financing. Developed market governments are still mobilizing the $100 billion they committed to international climate finance as part of the Paris Agreement in 2015. At the recent summit, UK Prime Minister Boris Johnson previewed that he will call on Western governments to commit even more to climate finance at COP26 in Glasgow.
But promised government funding has been slow to materialize. And it will not be enough to meet the challenge – particularly when public finances are stretched thin due to the COVID-19 crisis. Private capital will be essential to financing the green transition.
Nearly all big banks that we work with are setting up sustainable finance teams and offerings. The Glasgow Financial Alliance for Net Zero (GFANZ) launched ahead of the summit will accelerate these efforts. It brings together banks, asset managers, insurers and others to mobilize trillions of dollars in financing for the green transition.
As banks pivot to green financing, companies across sectors need to ask how they can leverage this capital. Can they use such funds to manage the green transition or invest in new opportunities? How will this shift affect their existing loan and insurance arrangements? Will they still have access to the capital they need tomorrow, under the same terms they have today?